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London stocks fell in early trade on Friday following heavy losses in the US and Asia as financial markets were hit by fresh worries about a trade war after China promised immediate retaliation to the hefty import tariffs levied by US President Donald Trump.
At 0845 GMT, the FTSE 100 was down 0.7% to 6,907.34, having tumbled to its lowest finish in over 15 months the day before at 6,952.59. Meanwhile, the pound was down 0.2% against the euro at 1.1442 and up 0.1% versus the greenback at 1.4110.
Overnight, the Dow Jones index closed 2.9% lower, the S&P 500 dropped 2.5% and the Nasdaq 2.4% as equities experienced their biggest sell off since 8 February.
Last night President Donald Trump signed off on 25% tariffs on $50bn worth of Chinese imports in a bid to punish the People’s Republic for intellectual property infringements.
China’s retaliation was immediate as it drew up a list of 128 products as potential retaliation targets for higher duties, aiming its sights at US goods such as pork, apples and steel pipe.
The commerce ministry in Beijing said in a statement on Friday said the higher US tariffs “seriously undermine” the global trading system. “China doesn’t hope to be in a trade war, but is not afraid of engaging in one,” the statement said.
In Asia the Nikkei was down 4.5%, the Hang Seng down 3% and the Shanghai Composite down 3.4%.
Spreadex analyst Connor Campbell said: “Investors aren’t just reacting to the firing of the potential first shot in a trade war, and awaiting the likely retaliation form China, but news that HR McMaster has been replaced as national security advisor by foreign policy hawk John Bolton.
“Bolton, who worked under Reagan and both Bushes and was a key proponent of the Iraq war, has previously backed attacking both North Korea and Iran, and is the latest destabilising figure to enter the White House’s already stacked rogue’s gallery.”
Konstantinos Anthis, head of research at ADS Securities, said a trade war between the US and China will have a damaging effect on US and global equities but it could have even more significant consequences than we realise.
“An extended sell-off in the equity market triggered by these tensions could pose a difficult dilemma for the Fed down the road.
“Does it hike rates on two more occasions, as expected and risk driving drive the stock market even lower or should it step back and slow down their gradual rate increases? This scenario has very lows chances of materializing but the mere speculation that a full-scale trade war could prevent the Fed from staying on course could have a massive effect to risk sentiment and investors are already on the defensive.”
In UK corporate news, Next bucked the trend, rallying 3% as it kept the dividend flat despite reporting a 5.6% fall in earnings per share after store sales fell in the year to 31 January. Analysts said the fact it has maintained its full-year guidance will be taken well following recent weakness and negative news flow from the UK retail sector.
“Next’s 54-page-long results release is a whopper but it is what is missing from the statement that matters more than what is in it – there is no profit warning, there is no dividend cut and there is no sense of panic,” said Russ Mould, investment director at AJ Bell.
GlaxoSmithKline was in the black after saying it’s no longer interested in Pfizer and announcing European and Japanese approval for its Shingrix shingles vaccine.
Engineer Smiths Group slumped after it posted a 12% drop in interim profit as revenue fell, although it did reiterate its guidance for the year.
Brick maker Ibstock was a little weaker as it confirmed that Joe Hudson will be appointed as CEO of the company from 4 April, on completion of the handover period with retiring Wayne Sheppard.
Shares in Indivior took a beating after the company said it was likely to appeal a ruling from the US District Court of Delaware, which found that Alvogen does not infringe the asserted claims of three of its US patents protecting its key Suboxone Film treatment for opioid addiction. If Alvogen is successfully launched in the US, Indivior said it believes “it could potentially result in a rapid and material loss of market share for Suboxone Film in the US” within months.
There wasn’t much going on on the broker note front, although Mitie did get a big boost from an upgrade to ‘overweight’ from ‘underweight’ at Barclays.
